Starting a business might seem like a lengthy and complicated process, which is true only if you’re winging the process without any guidance. However, with adequate planning and the right tools, you can avoid making unnecessary mistakes that will cost you time and money.
70-80% of South African SMEs fail within five years, which is staggeringly high. Various reasons contribute to business failure, and a lack of planning is one of them.
From the preparation stage, such as creating a business plan and understanding legal requirements, to bootstrapping your business
1. Create a Business Plan
Creating a business plan is the first and most important step in planning to start a business; there’s no avoiding it. A business plan is just like the GPS you use when travelling to an unfamiliar destination – without it, you’re likely to get lost.
Your business plan works as a map on how to start, manage, and grow your business as you scale. Your business plan should cover essential aspects, which are:
- Executive Summary
- Company Overview and Team Structure
- Problem, Solution and Market Analysis
- Product or Service Offerings and Unique Value
- Marketing and Sales Strategy
- Competition and Competitive Advantage
- Operations and Management
- Milestones, Metrics and Financial Forecasts
- Funding Requirements
Fortunately, you don’t have to do this on your own, as you can utilise free business plan templates available online.
2. Register Your Business
Once you’ve created your business plan, it’s time to make your business official. The Companies and Intellectual Property Commission (CIPC) is the South African government body responsible for business registration.
As of 2025, the cost of registering a private company (Pty) Ltd with a standard Memorandum of Incorporation is approximately R125. You can register your business online via the CIPC website. Alternatively, you can apply through BizPortal for a more efficient process. BizPortal also enables you to simultaneously apply for a business bank account, B-BBEE certificate, and UIF registration.
Does CIPC automatically register you with SARS?
Yes. Once your company is registered with CIPC, the details are automatically sent to the South African Revenue Service (SARS), and your business is issued a tax reference number within a few days. However, you still need to register for VAT (if your revenue exceeds R1 million annually), along with Pay As You Earn (PAYE), the Unemployment Insurance Fund (UIF), and the Skills Development Levy (SDL) if you plan to employ staff.
3. The Legal Requirements of a South African Business
Before commencing operation, you must ensure your business complies with South Africa’s legal requirements. These include:
- Tax Compliance: Registering with SARS is mandatory. You must submit annual tax returns, and depending on your turnover, you may also need to register for VAT.
- Labour Laws: If you have employees, you must comply with the Basic Conditions of Employment Act, including paying at least the national minimum wage and providing fair working conditions.
- Licences and Permits: Some businesses require specific permits, such as health and safety compliance for food outlets or liquor licences for alcohol retailers. Check with your local municipality or industry body.
- B-BBEE Certificate: If you want to do business with the government or certain large corporations, you need a B-BBEE certificate. Businesses that participate in Black Economic Empowerment (BEE) tend to get preference with regard to business opportunities.
- COIDA Registration: If you employ anyone, you’re legally required to register with the Compensation Fund to cover workplace injuries.
4. The Best Way to Bootstrap Your Business
Research suggests that only 1% of South African SMEs gain access to funding. So, if you are bootstrapping your business, you’re among the 99% of businesses nationwide that operate without external financial support.
There are common bootstrapping mistakes to avoid, such as the frequent mistake among new entrepreneurs of failing to keep their personal and business finances separate.
Here are some key tips to bootstrap effectively:
- Separate Your Business and Personal Finances: You should keep your funds separate by opening a dedicated business bank account. This simplifies bookkeeping, builds credibility, and keeps you legally compliant.
- Outsource Where Necessary: Instead of hiring full-time staff, outsource tasks like design, bookkeeping, or marketing to freelancers until you can afford a team of full-time workers.
- Use Free and Low-Cost Tools: Take advantage of free digital tools for project management (Trello), accounting (Wave), and marketing (Canva). These tools have paid versions that you can subscribe to as you scale.
- Reinvest Profits: It’s tempting to pay yourself early on, but consider paying yourself just enough to cover your expenses. Reinvesting profits back into your business will fuel growth.
